Drugmakers' blockbuster hopes

FDA considering Merck's cholesterol drug Cordaptive, Lilly's heart drug prasugrel. Merck expected to soon file diet drug.

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By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- The drugmakers Merck and Lilly are the biggest players in Big Pharma's late-stage pipeline, with three possible new blockbusters expected in the coming months.

Merck's experimental cholesterol drug Cordaptive appears to be the safest bet as a possible billion-dollar-a-year product, analysts say. But they're more cautious about the company's experimental diet drug taranabant since weight loss products are notoriously risky.

Also, analysts are guarded about Lilly's experimental heart disease drug prasugrel, a highly effective drug with potentially dangerous side effects.

Merck & Co., (MRK, Fortune 500) the drugmaker based in Whitehouse Station, N.J., is awaiting a regulatory decision on Cordaptive, which works by raising high density lipoprotein, or HDL, a beneficial form of cholesterol.

Merck filed its Cordaptive application to the Food and Drug Administration last year, and company spokesman Ron Rogers said a regulatory decision is expected this spring.

The market for cholesterol drugs is extremely lucrative. The drug market's biggest seller, Pfizer Inc.'s (PFE, Fortune 500) Lipitor, is a statin that lowers so-called "bad cholesterol," with nearly $13 billion in 2006 sales. But the market also faces generic pressure, since the patent on Merck's former blockbuster statin Zocor expired in 2006.

"Raising HDL is starting to become more and more appreciated as a part of cardiovascular health, and there aren't many things that can do that," said Les Funtleyder, analyst for Miller Tabak.

Funtleyder and James McKean, analyst for Atlantic Equities, both think that Cordaptive could hit $1 billion in annual sales within five years.

But Robert Hazlett, analyst for BMO Capital Markets, said that Cordaptive's side effect of facial flushing could "hold down sales," particularly since it would compete with Abbott's (ABT, Fortune 500) established drug Niaspan.

Analysts expect more serious obstacles for Merck's experimental weight loss drug, taranabant.

Merck is expected to seek FDA approval for taranabant, also known as MK-0364, sometime this year, though the company hasn't specified a filing date. Analysts are focusing on taranabant's similarities to Zimulti, a weight loss drug from the French drug company Sanofi-Aventis (SNY) that is also known as Acomplia or rimonabant.

Zimulti was shot down by a panel of FDA advisers in 2007 because of its tendency to cause depression and suicidal thoughts. Sanofi pulled Zimulti from the regulatory process in the U.S., despite the fact that is already approved in Europe, where it is widely used.

"Given the issues that Sanofi had with Zimulti, I'm pretty skeptical [about taranabant,]" said McKean.

Funtleyder said that taranabant is likely to fall under intense regulatory scrutiny even if there are no psychiatric effects like with Acomplia, because of the drug's potential for abuse by people obsessed with losing weight fast.

"People might use it for unintended uses," said Funtleyder. "Teenage girls might try to get their hands on it."

America is suffocating under the weight of an obesity epidemic and the money-making potential for a successful weight loss drug is huge.

But drugs in this class are often accompanied by dangerous or unpleasant side effects. For example, GlaxoSmithKline's (GSK) over-the-counter diet drug Alli works by blocking the absorption of most fats, resulting in "more frequent stools that may be hard to control," according to the company.

Also, many people still have fresh memories of the fen-phen debacle. In 1997, Wyeth (WYE, Fortune 500), formerly known as American Home Products, was forced to take this weight loss drug off the market after some patients suffered complications with their heart valves, resulting in a $3.75 billion settlement from the company, though the true liability cost was billions more.

On Dec. 26, the Indianapolis-based drugmaker Eli Lilly & Co. (LLY, Fortune 500) filed its experimental drug prasugrel for FDA approval. This drug would be used to prevent heart attacks in patients receiving stents. If approved, the drug would be called Effient, said Lilly.

In November, Lilly released a study showing that its anti-clotting drug works better than Plavix, the blockbuster drug from Bristol-Myers Squibb (BMY, Fortune 500). But prasugrel's potentially dangerous side effect of bleeding deflated the blockbuster expectations that many analysts had for the drug.

"It looks like [prasugrel] is highly effective, but the safety is questionable," said Michael Krensavage, analyst for Raymond James & Associates. "It would be a gigantic drug if they could provide superiority to Plavix, which they did with efficacy, but not with safety."

But there is a bright spot for prasugrel, said Hazlett of BMO Capital Markets, because tests have shown that diabetics did not suffer any extra bleeding risk with the drug. He said that prasugrel could succeed as a niche drug for diabetics undergoing stent procedures.

Dr. Anthony Ware, Lilly's vice president and cardiovascular leader for prasugrel, said that bleeding was increased only within 20 percent of the patients. Those patients all had a history of stroke, or weighed less than 130 pounds or were older than 75 years of age. The other 80 percent of the patients "did not have significant increase in bleeding," Ware said, adding that the "safety in the entire population is acceptable" and the efficacy is "superior."

In addition, Ware said that Lilly will begin late-stage testing in the second quarter for a broader population - preventing heart attacks in patients who are not receiving stents.

Since analysts tend to be down on prasugrel, any successes with the drug could lift Lilly's stock.

"Skepticism is priced in, and there's a good chance for outperformance from prasugrel," said Hazlett. To top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.